JP/Analysts see no de-industrialization

Despite slower growth in some business sub-sectors, Indonesia is not suffering from "de-industrialization", with manufacturing continuing to play a significant and stable role in the economy, a seminar heard Wednesday.

Head of the Research and Development Agency at the Industry Ministry, Dedi Mulyadi, said de-industrialization was not occurring in Indonesia, as some economists have suggested, pointing to the fairly stable contribution of manufacturing to gross domestic product over the past three years.

De-industrialization is broadly defined as a decline in the manufacturing industry's real output for a relatively long period of time.

"According to the Central Statistics Agency, the contribution of manufacturing to Indonesia's GDP during the last three years had been stable at above 27 percent.

"In 2005, it was 27.41 percent, in 2006, it was 27.54 percent, and in 2007, it was 27.01 percent," he said.

Dedi said the government acknowledged that several sub-sectors experienced negative growth in 2006 and 2007, pointing to textile, timber and wood products.

The textile industry has been hit hard by an influx of Chinese products into domestic market, both legally and illegally, while wood-related products have been hurt by widespread illegal logging.

Head of the Indonesian Textile Association, Benny Soetrisno, said the negative growth in the textile sector was a blip and that the sector's competitiveness was still good.

He said there were several conditions that prevented de-industrialization in the textile industry.

"The industry has an integrated structure and long experience. Besides, Indonesia's textile industry possesses one of the world's largest production capacities."

"Now, the already strong competitiveness is supported by the government's seriousness to expand the industry," he said, citing a recent government subsidy scheme for textile makers to revitalize aging machinery.

However, Anton J. Supit, head of the Indonesian Footwear Association, said some indicators pointed to the footwear industry standing on the brink of de-industrialization.

"For example, we can see that since 2006, some footwear makers like PT Dong Yoe Indonesia, PT Tong Yang, PT Spotec, PT Korionesia and PT Asia Sport have closed down, putting 19,000 people out of work," he said. (uwi)